January home sales give rise to correction concerns

TORONTO -- Surging sales in the piping hot real estate markets of Toronto and Vancouver last month prompted one of Canada's big banks to express concerns Tuesday that the cities may be at risk of a home price correction.

See Full Article

The Canadian Real Estate Association reported Tuesday that sales of existing homes rose by eight per cent in January compared to a year ago, while the national average home price soared 17 per cent.

But it was the sales figures for Vancouver and Toronto that drew considerable notice from economists.

The average sale price in greater Vancouver rose 32.3 per cent year-over-year to nearly $1.1 million, while in greater Toronto it climbed 14.2 per cent to $631,092.

The Multiple Listing Service benchmark price -- a figure that CREA says is more representative of the market -- rose to $775,300 in great Vancouver, an increase of roughly 21 per cent compared to January 2015. In greater Toronto, the benchmark price climbed roughly 11 per cent year-over-year to $578,400.

TD economist Diana Petramala said some of the strength in the Toronto and Vancouver markets may have been bolstered by buyers looking to get into the market before new mortgage down payment rules took effect Monday.

New federal regulations require larger down payments on homes that cost between $500,000 and $1 million.

"While we continue to believe that things just can't any hotter, markets in B.C. and Ontario continue to prove us wrong," Petramala said in a note to clients.

Petramala said although foreign investment and immigration are likely to provide support to the Toronto and Vancouver markets in the months ahead, she raised concerns about whether sky-high home prices in those regions are sustainable over the long term.

"Every month of double-digit home price growth raises the risk of a deeper home price correction down the road," Petramala said.

A correction is defined as a drop in value of at least 10 per cent.

The price gains in Vancouver and Toronto fuelled a rise in Canada's national average home price in January to $470,297, CREA said.

When excluding Ontario and British Columbia, however, the average sale price actually edged lower by 0.3 per cent from a year ago to $286,911.

Regional differences stemming from the impact of the oil price shock are likely to continue throughout this year, said BMO economist Robert Kavcic.

"Those markets exposed to oil prices are correcting," he said in a note.

"The uber-tight big-two cities are benefiting from lower interest rates than we otherwise would have seen had oil prices not fallen, while everyone else is scattered in between."

On a month-to-month, seasonally adjusted basis, CREA says national home sales rose 0.5 per cent in January, compared to December of last year.

Meanwhile, the number of new listings on MLS declined by 4.9 per cent in January compared to December.

"Tighter mortgage regulations that take effect in February may shrink the pool of prospective homebuyers who qualify for mortgage financing and cause national sales activity to ease in the months ahead," CREA chief economist Gregory Klump said in a statement.



Advertisements

Latest Economic News

  • Vancouver passes Toronto as 'most expensive' city in Canada

    Economic CTV News
    An annual ranking of the cost of living in hundreds of cities worldwide suggests that Vancouver has overtaken Toronto as the most expensive in Canada, although both remain relatively affordable by global standards. The Mercer 2017 Cost of Living Survey placed Vancouver at 107, followed by Toronto at 119, Montreal at 129, Calgary at 143 and Ottawa at 152. Source
  • Inflation rate cools to 1.3% in May as food prices now cheaper than a year ago

    Economic CBC News
    Food prices have gotten cheaper in the past year, Statistics Canada says. (The Associated Press) The cost of living went up by 1.3 per cent in the year up to May, a slightly slower pace than it increased by a month earlier. Source
  • Inflation rate cools to 1.3% in May as food got cheaper

    Economic CBC News
    Food prices have gotten cheaper in the past year, Statistics Canada says. (The Associated Press) The cost of living went up by 1.3 per cent in the year up to May, a slightly slower pace than it increased by a month earlier. Source
  • Weaker growth in gas prices helps slow annual inflation rate to 1.3 per cent in May

    Economic CTV News
    OTTAWA -- Canadian inflation eased up on the accelerator last month as weaker year-over-year growth in gasoline prices helped slow the annual rate to 1.3 per cent, Statistics Canada said Friday. The May inflation rate was also lower than April's reading of 1.6 per cent because prices declined in electricity, bakery products and Internet access services, the agency said in its latest monthly report. Source
  • Why is the teen summer job disappearing? [Video]

    Economic Toronto Sun
    WASHINGTON — It was at Oregon’s Timberline Lodge, later known as a setting in the horror movie “The Shining,” where Patrick Doyle earned his first real paycheque. He was a busboy. The job didn’t pay much. But Doyle quickly learned lessons that served him for years as he rose to become the CEO of Domino’s, the pizza delivery giant: Source
  • BlackBerry swings to $671M quarterly profit despite lower sales

    Economic CBC News
    BlackBerry is reporting a $671 million US profit for the first quarter but its revenue was lower than expected, missing analyst estimates. The company says its revenue for the quarter was $235 million US — compared with estimates of $264.39 million US, according to Thomson Reuters data. Source
  • BlackBerry to report Q1 earnings amid acquisition speculation

    Economic CTV News
    WATERLOO, Ont. -- BlackBerry will release its latest quarterly report today -- the first since its stock bounced higher amid speculation that the former smartphone maker may be a prime acquisition target. BlackBerry's shares (TSX:BB) rose about 50 per cent from roughly $10 in April to a 52-week high of $15.82 on June 1 at the Toronto Stock Exchange. Source
  • BlackBerry shares fall despite Q1 profit; revenue lower than analysts expected

    Economic CTV News
    WATERLOO, Ont. -- BlackBerry (TSX:BB) is reporting a US$671 million profit for the first quarter but its revenue was lower than expected, missing analyst estimates. The company says its revenue for the quarter was US$235 million -- compared with estimates of US$264.39 million, according to Thomson Reuters data. Source
  • Brexit anniversary: British economy faces more pain

    Economic CTV News
    LONDON - Few events outside of war can have quite as much potential impact on the economy of a country as Britain's decision a year ago to leave the European Union. The momentous vote on June 23, 2016 has the potential to sever Britain's ties to its main trading partner, a grouping it has spent more than four decades building ever-closer ties to. Source
  • Too little, too late? Sears tries to rebrand by getting hip, hiding name

    Economic CBC News
    In its battle for survival, Sears Canada is trying to shed its old-school image and replace it with a fresh look and hipper brands. It has even opened a flashy pop-up store in downtown Toronto that sells trendy ripped jeans and keeps quiet its affiliation with Sears. Source